Advisors Not Seeing Immediate Gains From A Transition

Aggressive recruiting efforts among Broker Dealers has led to a surge of advisors shifting platforms in search of better payouts and opportunities.

Many offers include sign on bonuses, transition support, and more. However, many advisors find that it takes longer than expected to get back to previous production levels, much less achieve significant gains even years after a transition.

The Transition: We commonly see a couple of scenarios occur when advisors transition:

1. Revenue slump: It can take them 2-3 years to get back to previous production levels, even with low attrition. This is usually because they struggle to fully adopt and implement the tools and resources available at the new firm (usually due to lack of understanding/training) and because it may take longer than expected to move clients over (as much as two years in some cases)
2. Generational Friction: The practice transitions to a new platform as part of a succession plan, with only the senior advisor coming from outside the platform or both the senior and NextGen advisor moving together to a new BD that is more amiable to partnerships and ensemble arrangements. The senior advisor is used to an old way of doing things and is resistant to raise fees and/or charge for things they haven’t been charging for previously. Service model can also play a factor, especially for advisors coming from certain BDs, but generally it becomes a conflict between NextGen seeing the value in the new models and fee structures, and the senior advisor wanting to stick with what they have always done.

Often the advisor transitions because they see an opportunity to provide more support/offerings to their clients or because they see a financial or succession opportunity for themselves. But there is a lot of change that happens at once, and advisors can quickly become resistant to changing certain things due to change fatigue, fear of what clients might think or say, or because its foreign to them. The process often takes longer and is more challenging/stressful than they expect, which also makes them more resistant to employing the new strategies.

Missed opportunity: The resistance to change does result in missed opportunities and can even put an advisor at risk.

• The demand for financial advice has doubled over the past 5 years. People want and are willing to pay for comprehensive financial plans and advice. Studies also show that clients with financial planning relationships generate as much as 7x more net flows than those with only managed accounts.
• The great wealth transfer will put assets in the hands of new generations and client groups that demand more personalized experiences, more frequent contact, as well as digital solutions.
• There is ever increasing pressure to move to fee based, from clients and the industry. The general sentiment in the market and from influencers in the space is that a fee-based advisor is more likely to act in your best interest (they do well when you do well)
• Percentage of recurring revenue is one of the key drivers of practice value (higher recurring revenue helps drive value up).
• Resisting these market trends and failing to adapt to new service models and business models can lead to loss of clients and talent, as well as a decline in revenue and practice value

We often recommend that an advisor start using the new service model and fee structure on new clients, and slowly transition existing clients to the new model and fee structure over time (either as part of the overall transition or after they have gone through the initial transition from one BD to another). This lets the advisor develop and fine tune their messaging and value proposition for existing clients, while building their confidence in the new approach.